>> susie: standard & poor's puts 15 of its 17 countries on watch for possible downgrade. included in that warning? >> tom: meanwhile here at home, >> tom: meanwhile here at home, heavy debt load on the postal service. it's "nightly business report" for monday, december 5. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:

>> susie: good evening everyone. europe was put on notice tonight. after the market close, standard & poor's placed 15 european countries on "negative credit watch." that means the countries' credit ratings could be cut. tom, the warning even applies to the euro-zone's six aaa-rated nations, including germany and france. >> tom: susie, european government credit ratings may be cut, depending on how much progress european leaders make at their summit on friday. s&p cited several reasons for the warning, including tightening credit conditions in the region, continuing disagreements among european policymakers on how to resolve the debt crisis high levels of government and household debt and the risk of a recession in

the eurozone next year. >> susie: joining us now with more analysis? bob doll, chief equity strategist at black rock. john what are the odds now of a credit downgrade after this credit watch warning that you issued tonight? >> well, the standard definition of credit watch is one in two likelihood or more of a credit downgrade. imperically about 70% of sovereigns that have gone on credit watch have ultimately been downgraded in the last 20 years. >> tom: a significant warning then. you cite, quote tlarx systemic structures in the euro zone have ris then recent weeks what specifically you have more concern today versus say six weeks ago or six months ago? >> well, it's all an incremental thing. but what we feared now that there has been a lot of expectations built up for the summit. and that if those expectations are

disappointing, then we could have a definite leg down that would be very difficult to come back from. >> tom: in your credit warning can you separate between the level of debt that europe currently has versus the concerns about a european recession or lack of economic growth in europe? >> well, there's several factors at play. one is the plirt call impasse that ef-- impact that we've seen on getting closer to a fiscal union throughout europe which we think would put them on a stronger footing. we cited a number of issues with the banks and their ability to roll over their debt to nonresidents. and also the monetary policy-settings. and their appropriates on for all of the economies in the euro zone. all of these factors are at play in our codity watch action. >> with this in regard and with so much now keyed up on friday's sum wit european union leaders, what specific

actions with would you like those eu leaders to take that could then perhaps not submit the credit rating to an actual downgrade in the next 90 days? >> well, we don't give policy advice. but you have several people including the president of the ecb pointing to a fiscal compactment and in our way of thinking of things, that would include not only a mutualization of the obligation or at least some of the obligations of your ozone but greater resources, greater revenues that will be shared at a eurozone level. that weernl certainly would be a big step forward and would help to relieve some of the pressure on what we see on the zone throughout. >> tom: john, finally, back in august, of course, s&p downgraded the u.s. credit rating it has now put 15 european union countries on woorning for a possible credit rating. overall government finances throughout the world and the

developed world seem to be under significant pressure. do you see that changing over the next year? >> i don't see the pressure on the developed markets changing. i think that we're in for a long slog ahead of us and it could be that government bonds will no longer be a aaa asset class. >> tom: certainly that's the case neither u.s. and possibly in europe. john, we appreciate the analysis. john chambers tonight, with the major indices were higher more analysis? bob doll, chief equity strategist at black rock. hi, bob, nice to have you with us. >> good evening, susie. >> susie: all right so, what is your take on this s&p announcement? >> look, i think they're doing what they have to do. there are stresses and strainings and the situation continues to worsen. and as a result they can't stand by and watch so they put these things on codity watch, i think should be no surprise. the monkey son ot european's

back at the moment, to get an austerity program in place, that has some teeth and they find a way to grow. that's a tall order o susie. >> susie: do you think that this action by s&p will mott nature-- motivate european leaders to do something new, it really a wake-up call. >> well there have been a lot of wake-up calls. among them the market having riots and going down quite a bit as you know on and off in the last bunch of months, and yet this is another sign, i think, that over the last few month os we have-- or few weeks we have begun to get some action to say maybe they do here. let's hope that there is traction. the meeting is coming up much and these next few days is important in that regard. >> bob wa, do you think are the solutions to the problem watch. do you think needs to be done to fix the debt crisis in europe? >> i think what has to happen is we have to have some solidarity around a more united fiscal policy for europe. and they're working on that.

that policy has to have teeth whereby if i am a country and i don't do what i say i'm going to do there is some sort of penalty. and then in order to grow o we have to find ways to collect more revenues and reduce our expenses at the government level. those countries have to become more competitive. i am just giving you a recipe that has a fair number ingredients, susie it they are difficult and it will take time. >> susie: it is a tall order. in the meantime what does this action by the s&p mean for u.s. investors s this ray good development for the bond market? >> it's fever good when you see credits going in the wrong direction or ot warning that they could. and what i think is the market is not going to be all that surprised. i think that given how the spread between the lower quality and higher quality countries in europe have moved up, there's no question but the bond market knows these concerns exist. so i'm not sure there is a whole lot of news here

susie. >> susie: what about the implications for the u.s. stock market. does it make u.s. stocks a little more attractive given the new risks in europe? ness with well, we would have argued that europe was headed for, if not in a recession already, and the u.s. while not growing strongly certainly is improve og. and that's why you've seen the u.s. stock market outperform most of the stock markets in the world not just europe, over ot course much this year. we suspect there's more of that to come to the extent the u.s. continues to grow its revenues and earnings. >> you said a moment ago that this doesn't come as much of a surprise between what is going on with the s&p and ratings. but how do you think investors will react to this news tomorrow when the market opens. >> i suspect there will be some sellers who will say, you know, i thought i should be selling. maybe i will sell a little bit pore but on the other hand i think what's more important is what comes out of these policy meetings over the next few days. does what germany and france

have been talking about have some reach beyond just those two countries. can the peripheral countries of europe sign on to that fiscal austerity with key plans. if they k those markets will rally despite this warning. >> absolutely. a lot of questions hanging over the market. thank you so much for coming on the program. really appreciate it. >> and we've been speaking with bob doll, chief equity strategist at black rock. >> tom: earlier in the day, stocks were higher on hopes the e.u. would get its act together this week, but wall street gave up some of those gains ahead of the close as reports of the s&p eurozone bond warning made the rounds. at the close, the dow added 78 points, the nasdaq rose nearly 29 and the s&p 500 up almost 13 points. the gains were added to the big jump we saw last week. as the year nears its end stocks have regained some of the momentum lost in november. erika miller tonight on what history tells us about the rest of the year.

♪ ♪ ♪ ♪ >> reporter: 'tis the season to be jolly, especially if you are a stock market investor. december is historically the chart-topping month for the stock market. it's been that way since 1929, 1945, as well as 1970-- the year elvis's christmas album came out-- one of the best-selling holiday albums of all time. ♪ ♪ ♪ ♪ over the past three decades, december has posted an average gain of 1.8%, more than twice the average increase for all months. s&p's sam stovall believes the year-end rally is largely due to a change in investor perspective. >> investors, because they are now focusing on 12 months ahead rather than only about three months ahead, as we approach the end of the year, then i think optimism takes over. investors put their money to work and basically expect the coming year to be fairly strong.

the question is whether this year will follow historic patterns. on the one hand, u.s. economic data seems to be improving. the unemployment rate dropped last month and consumer confidence hit its highest level since july. and judging by black friday and cyber monday results, jingle bells are ringing at cash registers this holiday season. but, there is a big reason december may prove disappointing for the market. as strategist vadim zlotknov explains, the overarching concern is the debt crisis in europe, where the s&p 500 gets 14% of total sales. >> you have uncertainty as to what is the path that europe is going to choose. if it is a path of extreme austerity, it could actually depress the u.s. companies' earnings and the u.s. economic growth. >> reporter: another big worry is slowing growth in china, the world's second largest economy. that said, stovall still believes the s&p 500 will end next year around 1,360, which

would be 8% above today's close. >> i am a bull with a lower case "b." i think we probably could see a low end double digit advance based on where we are right now. i think that when you look at everything in terms of fundamentals, technicals, history, that there is a good chance for a positive return in the coming year. >> reporter: so, the hope for stock investors is that there will be gains in december, setting a positive tone for next year. but if there's no santa claus rally, watch out because historically that tends to precede bear markets. erika miller, "nightly business report," new york. >> susie: still ahead, your snail mail could move at a snail's pace. we look at the latest cuts coming to a post office near you. >> tom: senate democrats offered a scaled back version of their payroll tax cut extension today. it includes what senate majority leader harry reid calls a "tiny surtax" on millionaires.

surcharge the move is designed to appeal to republicans who shot down previous versions of the bill because of a 3.25% tax on incomes above $1 million. the latest democratic version is for a surcharge of less than 2% on income over $1 million dollars. the legislation also would extend the payroll tax cut next year, but only for workers, not the companies they work for. with the tax cut due to expire at the end of e year, president obama today pushed for urgent action. >> not only is extending the payroll tax cut important for the economy as a whole, it's important for individual families. it's important insurance for them against the unexpected. it will help them pay their bills, it will spur spending. it will spur hiring and it's the right thing to do. >> tom: republicans argue tax breaks for workers do little to stimulate the economy. they also believe the tax breaks should be paid for with cuts elsewhere in the budget, rather than relying on a surtax on millionaires as democrats have proposed.

>> tom: reports about a looming credit outlook downgrade for european government bonds took some of the steam out of u.s. stocks today. right from the opening bell, we saw some follow-through buying

after last week's big rally, but around 2 p.m. eastern, when the first reports hit about s&p threatening to downgrade the credit ratings of europe and the index took a hit. a second hit came when more reports indicated a ratings cut was expected after the close today. it finished off the lows of the session, ending with a 1% gain. oddly enough, big banks were not hurt by the threat of a european government debt downgrade. this exchange-traded fund is made up of big u.s. banks. with today's 2% rally, the fund is at its highest close in a month. big banks with big business in europe saw decent gains. morgan stanley was higher by almost 7%. citigroup finished up by almost 6%. j.p. morgan's 3.7% rally was the best among dow industrial stocks. today's rally came on the back of banking stocks. the financial sector led today's market, up better than 2%. technology and materials ended with gains of over 1% each. among the financial fuel?

insurer met-life, up more than 3.5% to a six-week high. while met-life's fourth quarter outlook was disappointing, it predicts earnings to grow as much as 7% next year. the growth will be driven by retirement products in the u.s. as well as its international business. the tech sector was helped today by a monday merger in the cloud computing space. germany business software giant s.a.p. is spending $3.4 billion in cash to buy successfactors, based in california. it's the latest deal of a big tech firm picking up a company concentrated in cloud computing, which is on-demand computing services. the deal sends s.a.p. stock down 2%, but successfactors leapt 51%. shares closed just shy of the buyout price of $40 per share. other names in cloud computing software shot up. taleo concentrates on job performance and compensation software. it jumped 20%. kenexa also focuses on employment recruitment and retraining software. shares jumped 16%.

business commerce software firm ariba rallied 14%. technology and commerce company ebay saw bids for its stock rise today. thanks to today's 3.7% rally, shares are at this highest price since mid-november. an analyst at raymond james upgraded the stock to a strong buy, pointing to strong holiday sales. while ebay is known for auctions, it has been putting greater emphasis on its fixed- price deals. and some of those deals may get shipped via fed-ex. its stock gained just over 1% after announcing an increase in shipping rates in early january. this is a six-week high tonight. in commodities, coffee and sugar rallied. traders point to a weaker u.s. dollar and worries about the south american crop for helping push up coffee prices. strong global demand also supported sugar buying. and that's tonight's "market focus."

>> susie: federal regulators approved tougher rules for risk- taking on wall street today, adopting the "m.f. global rule." it's named after the collapsed brokerage firm that's believed to have improperly used hundreds of millions of dollars of customer money. the new rules limit how the brokerage industry can invest client funds and stops firms from using customer money to buy foreign sovereign debt. separately today, two former m.f. global employees filed a class-action lawsuit against jon corzine-- the firm's former c.e.o.-- and other senior executives. the suit says they lied to employees about the firm's financial condition. here's what we're watching for tomorrow: quarterly results from retailers pep boys and men's warehouse, along with luxury homebuilder toll brothers. also tomorrow, it's the largest youth football and cheerleader program in the world. "beyond the scoreboard" looks at how pop warner has weathered a weak economy and how it's stayed in business for more than 80 years.

you may see fewer cars at the mall this weekend. more than a third of u.s. shoppers are already done with most of their holiday shopping, according to a new survey. another 28% of people surveyed said they plan to take a break from spending now that black friday is behind them. about four in ten shoppers plan to finish checking off their holiday lists at discount chains, highlighting that many americans are trying to remain frugal. >> tom: were bond holders misled about the miami marlins finances while being encouraged to buy bonds to build a new baseball stadium? that's what federal investigators want to know. miami, its surrounding county and the team are financing the stadium, with the city and county covering most of the $645 million cost of building the new stadium and parking lots. they issued $500 million in bonds to help pay for it. the stadium opens next spring. the team says it's cooperating with the investigation, but did not comment further.

the united states postal service wants to sharply reduce overnight delivery on first class mail.

it plans to close half its processing centers. sylvia hall takes a look at the announcement and what it means. >> reporter: when you drop a letter in the mailbox, the postal service expects to deliver it in one to three days. but the service now hopes to relax that standard to two to three days instead. >> our network is too big. we've got more capacity in our network than we can afford. we can't afford it today, we've got to make adjustments today. >> reporter: the cut in service standards would result from postal service plans to close half of its 487 mail processing centers across the country. dave williams runs network operations for the post office. he says last year the postal service delivered about 73 billion pieces of first-class mail. that's almost a 30% drop from its peak mail volume of over 100 billion pieces of first-class mail hit back in 2001. and by the year 2020, he thinks the postal service expects will have lost almost half of its first-class mail volume. >> the economy has really been tough on us the last couple of years, but the other more long- term issue is people pay bills online. theoretically, if you looked at

us as a regular business, we would be close to bankrupt now. we've used $15 billion of borrowing, and we have a negative income statement this year. the postal service wants the public's thoughts on the change, offering up a two-month comment period. while the change would not affect express or priority mail, it could save $2 billion a year. but analysts say the savings carry a price of their own. >> certainly, customers are not going to appreciate it, and its never a good idea-- a business model to make customer service worse. it doesn't generally lead to more revenue. >> reporter: equity analyst jim corridore says that could mean a minor boost for private carriers like u.p.s. and fed-ex as customers opt for high-speed delivery. >> the carriers at fed-ex and u.p.s. have already seen their shares shift from online sales, from ebay, from holiday shipping-- they're already very much getting a lot of that traffic diverted to them. so they're only going to see more of that over time, and the u.s. postal service is not able to capture that because they can't move as fast as companies like fed-ex and u.p.s.

regulators will have three reporter: months to review the changes, which means the earliest customers would see a difference in delivery times would be spring. sylvia hall, "nightly business report," washington. >> tom: that's "nightly business report" for monday, december 5. we want to remind you this is the time of year your public television station seeks your support. >> susie: support that makes programs like "nightly business report" possible. >> tom: thanks for joining us, and don't forget to support your public television station. i'm tom hudson. good night everyone. you too, susie. >> susie: good night tom. good night everyone. i'm susie gharib. we'll see all of you again tomorrow evening. "nightly business report" is made possible by:

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